AGENCY
I. Who is an Agent?
a. RS §1 “Agency” – the fiduciary relation which results from the manifestation of consent by 1 person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act.
i. 3 principal forms of Agency:
1. Principal & Agent (deals w/ Ks and communication);
2. Master & Servant (deals w/ torts); and,
3. Employer/Proprietor & Independent Contractor (communication or statement).
b. Vicarious Liability – wrongful act of Agent is imputed upon Principal to ensure that injured party obtains remedy for wrongful act done by Agent. It’s important to know who Agent is in order to go after the “deep pockets” of Principal.
1. For Agency, you need an agreement b/w Principal and Agent, but not necessarily a K, promise, or compensation. It may result although parties do not call it an agency and do not intend the legal consequences of the relation to follow (circumstantial evidence).
2. Ownership alone, regardless of presence/absence of owner in car at time of accident, establishes a prima facie case against the owner b/c presumption arises that driver is the agent of the owner.
3. Injured party gets favored by the law, more than owner who is also innocent b/c she could protect herself through her insurance, which covers any accidents by others driving the car, and she voluntarily made a conscience choice to give the coach her car.
ii. A. Gay Jenson Farms Co. v. Cargill, Inc. (1981) –A creditor becomes a Principal when he assumes de facto control over the conduct of his debtor, whatever the terms of their formal K may be. Here, creditor was an active participant in debtor’s operations rather than simply a financier. Cargill and Warren had a paternalist relationship, w/ Cargill making the key economic decisions and keeping debtor in existence.
1. Agent vs. Supplier – Factors indicating that one is a supplier, rather than an agent:
a. Supplier is to receive a fixed price for the property irrespective of price paid by him – most important.
b. Supplier acts in his own name and receives the title to the property which he thereafter is to transfer.
c. Supplier must have an independent business in buying and selling similar property.
2. Thus, Cargill ends up on the hook for another $2M owed to the farmers by Warren. Had Cargill kept his role as a simple lender then it would not have to pay the farmers.
a. Precautions à
i. Cargill – could’ve been careful in limiting degree of control, by being specific and detailed, and by keeping the relationship at arms-length.
ii. Farmers – if they weren’t feeling secure w/ Warren paying them, they could’ve:
1. Asked Cargill to guarantee Warren’s payment (w/ line of credit);
2. Schedule a more restrictive payment for quick turnaround; or
3. Get cash on delivery.
II. Liability of Principal to 3rd Parties in Contract
a. What is the Scope of the Agent’s Authority?
i. RS §26 Actual Authority – granted by Principal’s written/spoken words other than conduct, which, reasonably interpreted, causes Agent to believe that Principal desires him to act on Principal’s account
ii. RS §35 Implied (Incidental) Authority – Actual authority circumstantially proven which Principal actually intended Agent to possess. Includes such powers as are practically necessary to carry out the duties delegated. Authority to do acts which are:
1. Incidental to it,
2. Usually accompany it, or
3. Are reasonably necessary to accomplish it.
iii. RS §8 Apparent Authority Part I – “Holding Out” – Power to affect legal relations of another person by transactions w/ 3rd persons, professedly as Agent for the other, arising from and in accordance w/ the other’s manifestations to such 3rd persons. E.g. Principal holds out (manifests) salesperson as an agent to 3rd parties by giving the agent business cards, title, etc… Thereby, giving Agent apparent authority to bind the Principal.
iv. RS §27 Apparent Authority Part II – “Reasonable Belief” – Conduct of the Principal which, reasonably interpreted, causes 3rd person to believe that principal consents to have the act done on his behalf by the person purporting to act for him.
1. Note: Apparent authority is not actual auth
i. Nogales Service Center v. Atlantic Richfield Co. (1980) –Reasoning: Inherent authority depends upon neither actual nor apparent authority since it may make the principal liable b/c of conduct which he did not desire or direct, to persons who may or may not have known of his existence or who did not rely upon anything which the principal said or did. Held: For inherent authority, Terpenning must show that what Tucker did was not foreign to his duties as marketing manager. Argue à competitive pricing for truck stops is part of marketing. Arguably, Tucker would’ve had inherent authority since it requires a looser connection than implied authority.[2]
[1] Arguably, Kaufman had actual authority if shown (production of documents) that he was authorized to structure commissions for his employees.
[2] For apparent authority, although Tucker was held out by Arco as an agent, it would be hard to for Terpenning to show that he “reasonably believed” that Tucker had authority to enter into a sales deal.
LAF for Vicarious Liability:
(1) Who is the Agent?
(2) Who is the Principal?
(3) Who is the 3rd Party?
(4) What did the Agent Say or Do?
(5) Was What the Agent Said or Did Authorized? analyze it and see which kind of authority fits:
Four Kinds of Authorities:
a. Actual Authority (spoken or written – it’s given – i.e. Doty case)
b. Implied Authority (incidental to actual authority – reasonably necessary to accomplish authority – i.e. Mill Street Church case)
c. Apparent Authority (i.e. Lind case)
d. Inherent Authority (gives agents some flexibility in what they can do (i.e. Nogales, Watteau)
Three Elements Required to Show Agency Relationship:
(1) Manifestation by Principal that Agent will act for him
(2) Acceptance by Agent of the undertaking, and
(3) Understanding b/w them that Principal will be in control of the undertaking.
(4) Burden is on person alleging the existence of an Agency relationship
